Yesterday, I walked into a jewellery store to buy a 10-gram gold coin and the seller gave me two prices โน1,51,000 (Kacha) and โน1,61,000 (Pakka).
Same seller. Same gold coin. Same weight but the difference of โน10,000.
๐ช๐ต๐ฎ๐ ๐๐ผ๐ฒ๐ "๐๐ฎ๐ฐ๐ต๐ฎ" ๐ฎ๐ป๐ฑ "๐ฃ๐ฎ๐ธ๐ธ๐ฎ" ๐ฅ๐ฒ๐ฎ๐น๐น๐ ๐ ๐ฒ๐ฎ๐ป?
- The distinction is not about the quality of the gold.
- It is about whether the transaction becomes part of the formal economy.
- A "pakka" transaction is recorded, invoiced and reflected in the seller's books.
- A "kacha" transaction, on the other hand is often associated with transactions that are not fully recorded or documented.
- Two different prices for the same asset.
๐ช๐ต๐ ๐๐ผ๐ฒ๐ ๐ง๐ต๐ถ๐ ๐๐ฎ๐ฝ๐ฝ๐ฒ๐ป?
The answer lies in incentives.
- When a transaction is formally recorded, it brings with it taxes, compliance requirements, accounting obligations and a clear audit trail.
- When a transaction remains outside that system, some of those costs can potentially be avoided.
- Part of the resulting economic benefit may then be passed on to the buyer in the form of a lower price.
- The buyer saves money, The seller makes the sale.
- This is precisely why informal transactions continue to exist across sectors.
๐๐บ๐ฝ๐น๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป๐
- For the buyer, the incentive is obvious. Saving โน10,000 on a purchase is difficult to ignore.
- But when millions of such transactions take place across sectors, the consequences are significant:
โข Lower tax collections.
โข Unfair disadvantage to compliant businesses.
โข Distorted competition.
โข Reduced transparency in the economy.
The challenge is that enforcement alone cannot solve this problem.
๐ฆ๐ผ๐บ๐ฒ ๐ฝ๐ผ๐๐๐ถ๐ฏ๐น๐ฒ ๐๐ผ๐น๐๐๐ถ๐ผ๐ป๐
1) Reduce compliance friction.
Businesses should not feel that entering the formal economy comes with excessive paperwork and costs.
2) Create stronger incentives for invoice-based purchases.
Consumers should see tangible benefits in demanding proper bills, whether through tax benefits, reward schemes or stronger consumer protection.
3) Leverage technology.
Digital payments, e-invoicing and data integration can reduce opportunities for unaccounted transactions while lowering compliance costs.
4) Reward compliant businesses.
Honest businesses should not be placed at a pricing disadvantage against those operating outside the formal system.